- Prices fall by up to 32 per cent in 70 per cent of resorts and cities surveyed worldwide

- 18 per cent price fall helps Portugal’s Algarve power past Spain’s Costa del Sol to become cheapest in Europe- Bali topples Sri Lanka and Spain to rate cheapest of 44 destinations surveyed- Five-year lira low makes Turkey a hot tip: tourists will pay 19 per cent less in resorts- Vietnam is named top holiday hotspot for third year running as dong sales rise over 200 per cent in two years; South Africa is also a Post Office hotspot tip

Sterling’s slow climb back to strength against most holiday currencies means the forecast is looking much brighter for UK tourists planning trips abroad in 2014 - according to the eighth Post Office Travel Money Holiday Money Report.

Prices are down in 70 per cent of the 44 destinations surveyed by the Post Office for the annual report’s Worldwide Holiday Costs Barometer1 with the biggest falls of 30-32 per cent in Jamaica, Japan and the Gambia. Bali emerges as best value overall while Portugal’s Algarve is cheapest in Europe.

Resort prices in Portugal and Spain provide the report’s most unexpected story. Even though sterling is still weaker year-on-year against the euro (-1.9 per cent), prices have plummeted 18 per cent in the Algarve. As a result, Portugal emerges as Europe’s cheapest destination for the first time since 2010 and its barometer total of just over £35 suggests Portugal’s most popular resort area means strong business in the year ahead.

Conversely, Spain is the only eurozone country surveyed to register a significant price rise. A 22 per cent increase in meal costs on the Costa del Sol accounts for the overall rise in the price of eight typical tourist items to around £39, which means that Spain falls from joint first place in last year’s Worldwide Holiday Costs Barometer to sixth position.

However, Spain is in the minority because Post Office Travel Money says that cheaper tourist meals account for the lower prices it found in most destinations. Boosted by a sterling surge that will give UK visitors extra money to spend in over three-quarters of the most popular holiday destinations2, the report found that eating out costs less now than a year ago in 30 of the resorts or cities surveyed.

These include Bali, which has toppled both Sri Lanka and Spain from the top spot they shared a year ago. At around £31 for the barometer items2, including an evening meal with drinks, Bali’s prices are over a third cheaper than in Sri Lanka, which has fallen to 15th place after registering the barometer’s highest price rise of 38 per cent. A slump in the value of the Indonesian rupiah makes tourist costs 19 per cent cheaper in Bali now than a year ago.

In the eurozone Portugal is not the only destination surveyed where prices for UK tourists will be lower. Resorts in Cyprus (Paphos), Greece (Corfu) and Italy (Sorrento) are also cheaper, although Italy remains most expensive in the eurozone – and in Europe overall - with a barometer basket costing around £81, over twice as much as either Spain or Portugal.

Portugal and Spain can also expect to come under pressure from non-eurozone sunspots. Fashionable Croatia is one of 10 Post Office Holiday Hotspots3 for 2014 after a doubling of kuna sales in the past two years, and Bulgaria’s Sunny Beach has risen to fifth cheapest in the barometer. With prices down 10 per cent to £38.46, this is tipped as a good bet for wallet-watchers. Best of all, a five-year low in the value of the lira means Turkey’s leading resort, Marmaris, shares with the Algarve the distinction of Europe’s biggest price fall.

At around £41 for the essentials, UK tourists will pay 19 per cent less in Marmaris than a year ago. The resulting move up to seventh place in the barometer table brings Turkey close to long term rival Spain. This should help to create more demand for Turkey after last summer’s fall in family bookings following political unrest in the country.

Paul Havenhand, Head of Travel at the Post Office, said: “The fall in the value of the lira should make Marmaris and other Turkish resorts very attractive to bargain hunters. Not only have prices fallen this year but they are now 29 per cent cheaper than two years ago.”

Further afield, Vietnam is named as one of 10 Post Office Holiday Hotspots for the third year. Direct flights from the UK, cheap resort prices and a new crop of boutique beach hotels helped to stimulate a 94 per cent year-on-year surge in Vietnamese dong sales in 2013 – the biggest growth for any currency – with a cumulative increase of over 200 per cent in just two years. The Post Office expects Vietnam to build on this in 2014 as the new Etihad service to Saigon broadens the range of travel options for UK tourists.

South Africa is also named among the 10 Holiday Hotspots in the Holiday Money Report. As the country prepares to celebrate 20 years of democracy, Nelson Mandela’s recent death will renew interest in the country for UK travellers, while the rand’s continuing weakness against sterling will provide an added incentive. UK tourists are currently getting almost 28 per cent more rand for their pounds than a year ago and prices down 17 per cent year-on-year make Cape Town (£41.81) a top 10 value destination in the Worldwide Holiday Costs Barometer.

Paul Havenhand added: “Holidaymakers will be spoilt for choice this year with better value-for -money in most destinations worldwide. To cash in on this, UK tourists should do their homework before booking to find out where the pound is worth most and where resort costs are low. They can check out resort prices at www.postoffice.co.uk/worldwidecosts and then change sufficient travel cash to cover the cost of those tourist items, especially meals.”

In its forecast of likely trends for 2014, Post Office Travel Money tips Burma, Qatar and the Philippines as emerging destinations to watch. Burma is opening up to tourism with a rash of escorted tours designed to lead the way for more adventurous tourists and the re-introduction of direct flights from Heathrow to Manila should also help to stimulate demand for the Philippines. A year-on-year growth of 44 per cent in sales of the Philippino piso suggests that this move is already underway. In the luxury market, Qatar is tipped for success for the third year running after sales of the riyal grew a further 31 per cent in 2013.

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1 Post Office Worldwide Holiday Costs Barometer research (December 2013): see Holiday Money Report pages16-17 for the full table of costs for 44 destinations (while prices are quoted by country or island, the data relates to specific resorts, nominated by tourist boards as being most popular with UK tourists or representative of average tourist prices). The barometer table was compiled with the help of national and local tourist boards and specialist tour operators – Balkan Holidays (Bulgaria), Serenity Holidays (Gambia) Travelbag (various long haul destinations). Eight items – a three course meal for two with wine, cup of coffee, bottle of local beer, can of Coca-Cola, glass of wine, bottle of still water, suncream and packet of cigarettes – were selected as representative of the types of purchases UK tourists are most likely to make on a foreign holiday.

2 Sterling has strengthened against 33 of 42 Post Office holiday currencies. It is currently weaker against only nine holiday currencies – seven of these are European ones but the year-on-year drop in value is minor (0.1-2.0 per cent) for all barring the Icelandic krona (-10.8 per cent). See Holiday Money Report page 15.

3 Post Office Travel Money has identified 10 hotspots for 2014, based on a combination of factors including currency performance, new flight initiatives, low resort costs and the strength/stability of sterling. They are: Bali, Croatia, Dominican Republic, Japan, New Zealand, Oman, Portugal, South Africa, United Arab Emirates (Dubai and Abu Dhabi) and Vietnam. See Holiday Money Report pages 18-19 for analysis.

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